In Lieu of SBA Loans, Cannabis Sector Turns to State Options

April 6, 2020 – Alerts

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In the economic downturn triggered by the COVID-19 pandemic, cannabis companies operating in the marijuana space cannot look to the federal Small Business Administration to obtain Economic Injury Disaster Loans or Paycheck Projection Loans.

But there are some state and local programs available to those companies. Below is a list of state loans and other assistance programs that appear to be open to cannabis companies. Many of these programs are first-come, first-served, so companies in need should apply soon.

Our state-by-state list includes details on loans offered by a handful of key localities, but additional cities and towns may offer a local loan or grant programs. Some states are also offering tax assistance, which will be covered in a separate alert.

Alaska

At this time, Alaska has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

Arizona

At this time, Arizona has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

Arkansas

On March 20, the Arkansas Economic Development Commission established the Quick Action Loan Program to assist businesses negatively affected by the COVID-19 pandemic. The program is funded by $7 million of allocations from multiple Arkansas state funds and includes both loan guarantees and direct loans to businesses. Companies in the supply chain of essential goods and services, including healthcare, food manufacturing, and logistics, will receive preference. Fox has confirmed that as of this time, the Quick Action Loan Program is accepting applications from licensed dispensaries and cultivation centers. Additional information regarding the Quick Action Loan Program can be found here.

California

There are several financial assistance options to small businesses in California, such as the California Capital Access Program (CalCAP), the Disaster Relief Loan Guarantee Program and the Jump Start Loan Program. However, a majority of cannabis businesses will not be to access those lending options because they require the business to obtain lending through a traditional lender, which is most likely not an option for cannabis businesses.

Colorado

Colorado has not provided statewide business loans or grants other than the federally backed SBA loans and grants. However, the Colorado Department of Labor and Employment offers a Work-Share Program that provides businesses with an alternative to laying off employees. It allows businesses to let their employees keep working, but with fewer hours, while the employees can receive their regular unemployment benefits.

For businesses located in the city of Denver, the city has created an initial relief fund of $4,000,000 to support small businesses during this COVID-19 crisis. The Denver Economic Development and Opportunity (DEDO) is setting up an emergency relief program to provide cash grants up to $7,500 to qualifying small businesses. Qualifying businesses may have had to temporarily close, are struggling with paying their rent and utilities, or have had to lay off staff.

Connecticut

The previously offered program is closed.

Delaware

At this time, other than a program available only to the hospitality industry, Delaware has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

District of Columbia

At this time, Washington has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

Florida

In Florida, the Florida Small Business Emergency Loan Fund will provide short-term, interest-free loans to businesses with less than 100 employees that can demonstrate they have suffered a significant economic injury and are unable to pay their current operating expenses due to the COVID-19 pandemic. A total of $50 million has been allocated to the fund for these short-term loans, and individual loans will be given in amounts up to $50,000. Additional information regarding the Small Business Emergency Loan Fund can be found here.

Hawaii

Gov. Ige and the Department of Labor and Industrial Relations (DLIR) Director Scott Murakami have announced the launching of the Reducing Unemployment Disruption & Driving Economic Regeneration (RUDDER) program. The RUDDER program is an economic initiative that provides state employment & training funds that will facilitate an efficient labor exchange between the sectors hardest hit by COVID-19 and employers able to hire new employees. The program will provide up to $100,000 of relief to registered and compliant Hawaiian businesses for new employees hired after March 1, 2020. Businesses will receive an initial $500 payment for each new employee and another $500 after six months of continuous employment.

Illinois

The Illinois Department of Commerce and Economic Opportunity has established the Illinois Small Business Emergency Loan Fund, which will offer low-interest loans of up to $50,000 to qualifying small businesses. To be eligible, a business must be located outside of the City of Chicago, have fewer than 50 employees (at least 50% of which are Chicago residents) and less than $3 million in revenue in 2019, and have suffered at least a 25% decrease in revenues as a result of COVID-19. Licensed cannabis businesses are not excluded from participation if they otherwise meet the qualifications. Additional information regarding the Small Business Emergency Loan Fund can be found here.

The City of Chicago has established a similar fund, the Chicago Small Business Resiliency Fund, which will offer low-interest loans of up to $50,000 to qualifying small businesses located in Chicago with a valid City business license. Similar to the state fund, qualifying businesses must have less than $3 million in revenue in 2019 and have suffered at least a 25% decrease in revenues as a result of COVID-19. Licensed cannabis businesses are not on the list of types of businesses that are specifically excluded from participating. Additional information regarding the Chicago Small Business Resiliency Fund can be found here.

Louisiana

On April 1, Gov. John Bel Edwards announced that the Louisiana Loan Portfolio Guaranty Program would offer loans in amounts up to $100,000 to Louisiana business with fewer than 100 employees that have been negatively affected by the COVID-19 pandemic. The total loan pool will be $50 million, and loans will be provided by members of the Louisiana Bankers Association and guaranteed by a fund established by Louisiana Economic Development. The program will be administered by the Louisiana Public Facilities Authority. Louisiana Economic Development provided a list of specific types of businesses that are not eligible to participate in the program, and cannabis businesses are not listed. Potential borrowers must reach out directly to a participating bank or lending institution to apply. Additional information regarding the Loan Portfolio Guaranty Program can be found here.

Maine

The Finance Authority of Maine (FAME) has created the COVID-19 Relief Business Direct Loan Program. According to FAME, loans of up to $50,000 are available to Maine-based businesses experiencing interruption or hardship due to COVID-19 that can demonstrate that other sources of capital have been exhausted. The interest rates for the loans will be the prime rate listed by the Wall Street Journal, minus 1%, and will be fixed at the time of the loan commitment. Additional information about this program can be found here.

Massachusetts has not announced any type of state-funded business loan program. However, the state’s WorkShare Program and Rapid Response Program provides resources to economically challenged businesses to avert layoffs and retain staff.

Michigan

The Michigan Economic Development Corporation has established the Michigan Small Business Relief Program to provide up to $10 million in grant funding and up to $10 million in low-interest loans to qualifying small businesses.

To be eligible for the grant program, a business must be one of the businesses required to close pursuant to Michigan Executive Order 2020-9 (which does not include cannabis businesses), must provide goods and services to the aforementioned companies, or must otherwise demonstrate that it has been affected by the COVID-19 pandemic. In addition, the business must have less than 50 employees and demonstrate that it needs working capital to support payroll, rent, mortgage payments, utilities or other similar expenses that occur in the ordinary course of business. Grants will be made to eligible businesses in amounts up to $10,000 and may be used for working capital or other similar ordinary course expenses.

To be eligible for the loan program, the same requirements described above also apply, but the maximum number of employees has been raised to 100 and applicants are also required to demonstrate that they are unable to access credit through alternative sources and actually lost income as a result of Executive Order 2020-9. The loans will be in amounts ranging from $50,000 to $200,000 and will bear interest at 0.25% per annum, interest-only for 60 months following loan closing followed by a fully amortizing 60-month term.

Additional information regarding the Small Business Relief Program can be found here. As mentioned above, although cannabis companies were not listed in Executive Order 2020-9, they may be eligible for the program if they can otherwise demonstrate that they have been negatively affected by the COVID-19 pandemic.

Minnesota

Effective March 30, 2020, the Minnesota Department of Employment and Economic Development (DEED) announced the implementation of the Minnesota Small Business Emergency Loan Program. Pursuant to that program, DEED’s lender network will make available loans between $2,500 and $35,000 to qualifying businesses, which will be 50% forgivable and offered at a 0% interest rate. However, only businesses in the specified list of industries will be eligible to participate in the program, and cannabis businesses are not currently included on the list. Additional information regarding the Small Business Emergency Loan Program can be found here.

Missouri

At this time, Missouri has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

Montana

At this time, Missouri has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

Nevada

At this time, Nevada has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

New Mexico has not provided state-wide business loans or grants other than the federally backed SBA loans. The New Mexico Economic Development Department (NMEDD), however, has created a program to assist businesses seeking emergency loans or lines of credit to deal with negative economic impacts from COVID-19. NMEDD can guarantee a portion of a loan or line of credit up to 80% of principal or $50,000. Loan proceeds can be used for working capital, inventory, and payroll. This program requires businesses be able to receive a loan or line of credit from a traditional lender, so access to this guarantee program will depend on your relationship with your bank.

New York

New York City has implemented several programs providing loans or grants to businesses affected by the Coronavirus. For example, the NYC Small Business Continuity Loan Fund will provide zero-interest loans of up to $75,000 to businesses that employee 99 or fewer employees and who can demonstrate that the Coronavirus outbreak has caused at least a 25% decrease in revenue. The State of New York has not announced a Coronavirus-related loan program, but the NY Small Business Development Council has posted information here.

North Dakota

North Dakota has announced that loans and equity investment up to $1 million will be available to “primary sector” businesses under the North Dakota Development Fund, Revolving Rural Loan Fund and the Venture Capital Program. However, compassion centers (dispensaries and cultivation centers) in North Dakota may not be designated primary sector businesses, in which case these funds will not be available to cannabis businesses. Information regarding these programs can be found here.

Ohio

At this time, Ohio has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

Oklahoma

At the local level, the City Council of Oklahoma City approved a $5.5 million relief package for businesses hit the hardest by emergency closures in response to the COVID-19 pandemic. Qualifying businesses would need to demonstrate a loss of at least half their business, year-over-year, since March 16, and that they receive a majority of their revenue from in-store sales. It is unclear at this time whether medical cannabis businesses in Oklahoma City would qualify for this program. Even if they otherwise qualify, due to the fact that the medical cannabis business was designated as “essential” in Oklahoma and have remained open, it will likely be difficult for them to meet the requirements. No specific statewide financial assistance programs have been announced.

Pennsylvania

The previously announced program has closed.

Oregon

At this time, Oregon has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs and other programs unavailable to cannabis companies.

Oregon’s Small Business Stabilization Fund will provide funds to nonprofit organizations in Oregon that provide loans to small businesses particularly affected by COVID-19. Grants will be provided to community lending organizations or other nonprofit intermediaries. The state currently has not provided a list of organizations that will receive money from the fund. It is unclear at this time if these funds will be available to Oregon based cannabis businesses.

Rhode Island

Rhode Island is offering small grants and loans for certain underserved communities and for specific localities. The state also has a microloan program which requires that the applicant first applies for an SBA loan.

Utah

Utah has not provided statewide business assistance other than the federally backed SBA loan and relief programs. Salt Lake City, however, has created the Salt Lake City Emergency Loan Program for businesses within its city limits. Salt Lake City-based businesses can apply for a loan for up to $20,000 at 0% interest. Loans can be used for working capital, marketing, or inventory and repayment will be deferred for approximately 90-days following the expiration of the Mayor’s “Proclamation Declaring a Local Emergency.”

The city of Ogden has also created an Ogden City’s Emergency Loan Fund that is available to help companies immediately affected by COVID-19. That fund offers business loans up to $10,000 for working capital. The loans will be 0% interest with deferred payments for up to 12 months.

Vermont

At this time, Vermont has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

Washington

At this time, Washington has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.

However, Seattle based businesses may have access to the City’s Business Stabilization Fund, which provides grants of up to $10,000 if they meet the following requirements: (1) business owner must have low- or medium-income; (2) the business must have 5 or fewer employees, including the owner(s); (3) the business must have a physical location; and (4) the business must have experienced a loss of income due to COVID-19.

West Virginia

At this time, West Virginia has not provided any loan or other assistance outside of the federally backed SBA loan and other relief programs.